As 2014 comes to an end, we are pleased to present you with our traditional End of Year Plan Sponsor “To Do” Lists. This year we are presenting our “To Do” Lists in three separate Employee Benefits Updates. Part 1 of the series will cover year-end health and welfare plan issues, Part 2 will cover qualified plan issues and Part 3 will cover executive compensation issues. Each Employee Benefits Update will provide you with a “To Do” List of items on which you may want to take action before the end of 2014 or in early 2015. As always, we appreciate your relationship with Snell & Wilmer and hope that these “To Do” Lists help focus your efforts over the next few months.

Part 1 - Health & Welfare Plans “To Do” List

• Consider Impact of Supreme Court Defense of Marriage Act (DOMA) Case And Subsequent Increase in Number of States Recognizing Same Sex Marriage: As reported in our September 9, 2013 Legal Alert, “Agencies Issue Guidance on Same-Sex Marriage Impacting Employee Benefits,” the Internal Revenue Service (the IRS), the Department of the Treasury (the Treasury) and the Department of Labor (the DOL) have released guidance on the treatment of same-sex spouses. The IRS and the Treasury have ruled that same-sex married couples will be treated as married for all federal tax purposes if they were married in a jurisdiction that recognizes same-sex marriages, which is known as a “state of celebration” standard. As of the date of this newsletter, same-sex marriage is now legal in 32 states and the District of Columbia. As a result, employers will start to have more gay and lesbian employees, who previously could not marry their significant other in their home state, get married and request benefits for their spouse. There is no specific federal law that requires employers to offer health and welfare benefits to spouses. However, employers who offer coverage to opposite-sex spouses, but not same-sex spouses, could face discrimination claims under city, state or federal law. Discrimination claims under city or state laws are arguably preempted by the Employee Retirement Income Security Act of 1974, as amended (ERISA), but claims under Title VII of the Civil Rights Act, a federal law, are not preempted. Offering uniform benefits to all spouses is not only easier to administer, but avoids potential discrimination lawsuits. Employers who decide to offer coverage to same-sex spouses will have to update and amend their plans to treat same-sex spouses the same as opposite-sex spouses with respect to, among other things, the Consolidated Omnibus Budget Reconciliation Act (COBRA), special enrollment rights, and the ability to pay health benefits on a pre-tax basis (at least for federal purposes and for state purposes in those states that now recognize same-sex marriage). Employers who do not currently offer health and other welfare benefits to same-sex spouses should reconsider whether they now want to do so to avoid discrimination claims.
  
  The DOL also updated its guidance relating to the Family & Medical Leave Act (FMLA). FMLA leave is now available to care for a same-sex spouse. However, in order to be eligible for FMLA leave to care for a sick spouse, the current guidance requires employees to reside in a state that legally recognizes their marriage, whether same-sex or opposite-sex. This means that married same-sex couples who live in a state that recognizes same-sex marriage will be eligible for FMLA leave, but married same-sex couples who reside in a state that does not recognize same-sex marriage will not be legally entitled to FMLA leave. The DOL regulations adopting a state of celebration standard have yet to be finalized.

• Reconsider Need for Domestic Partner Benefits. As same-sex marriage becomes legal in more and more states, employers in those states should consider whether domestic partner benefits are still needed. Many employers originally offered same-sex domestic partner benefits in an effort to treat such couples the same as opposite-sex couples. However, such benefits may not be needed if employees with same-sex partners can now marry without having to leave their state of residence. Careful consideration should be taken before eliminating domestic partner benefits. If taken away too quickly, same-sex couples may feel like they are being rushed to marry. Although many same-sex couples are rushing to the courthouse to get married, other weddings will take time to plan. Employers should be mindful of this.

• Report and Pay Reinsurance Fees. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the Health Care Reform Act) created the transitional reinsurance program, which requires most self-insured health plans to make contributions to the Department of Health and Human Services (HHS) for the 2014, 2015, and 2016 calendar years. The contribution amount is determined by the number of covered lives under each plan. The number of covered lives must be calculated and submitted to HHS by November 15 of each year. The first filing is due November 15, 2014 for the 2014 calendar year. Data submissions and payments can be made online using Pay.gov. Covered lives may be calculated using several different methods, similar to the methods that are used to calculate covered lives for PCORI fees. Contributing entities should begin making these calculations using the various permitted counting methods so that they have time to establish the most cost-effective method for determining their 2014 contribution amount prior to the deadline. Results can differ significantly depending on the counting method used. For more information, please see our October 10, 2014 SW Benefits Update, “Reinsurance Program Requires Self-Insured Health Plans to File Enrollment Data by November 15 and Pay Fee Later.” 

• Comply with Large Employer Shared Responsibility Rules if Applicable, or Pay Penalties: As reported in our February 25, 2014 SW Benefits Update, “Health Care Reform’s Employer Shared Responsibility Penalties: A Checklist for Employers,” the large employer shared responsibility penalties take effect January 1, 2015 for most large employers. When the rules take effect, large employers will be subject to penalties if any full-time employee receives a premium tax credit or cost-sharing reduction and either: (1) the employer fails to offer minimum essential health coverage to substantially all (70% in 2015 and 95% in later years) of its full-time employees (and their natural born and adopted children); or (2) the employer offers minimum essential health coverage to substantially all of its full-time employees (and their natural born and adopted children), but the coverage is either not affordable or does not provide minimum value. These rules are incredibly complicated and are explained in much greater detail in the above-referenced Checklist. In the short-term, employers should:

• • Familiarize themselves with the rules. Employers who do not understand and react appropriately to these rules could face massive penalties.
  • Immediately determine and document whether they are a large employer for 2015. Employers may make this determination using Worksheet #1 of the Checklist.
  • Immediately determine and document if non-calendar plan year relief applies. Employers with plan years that do not start on January 1 may have a delayed effective date, beginning on the first day of their 2015 plan year. Employers must meet detailed requirements to qualify for the delay, one of the most important being that the plan year was not modified after December 27, 2012 to begin at a later date. Also, caution should be exercised because it is the plan year, not the policy year, which controls. Some employers with calendar year plan years and non-calendar policy years mistakenly think they qualify for the relief.
  • Decide whether to use the monthly measurement method or the look-back measurement method to track full-time employees. Penalties are assessed with respect to full-time employees. A full-time employee is an employee who, with respect to a calendar month, is employed on average at least 30 hours per week or 130 hours for the month. Under the monthly measurement method, a company determines each employee’s status as a full-time employee by counting the hours of service for the month. This method can be difficult to administer, especially for variable hour employees, because a company will not usually be able to determine until the end of the month, after it is too late to avoid penalties, whether an employee is full-time for the month. As a result, the IRS allows employers to use a safe-harbor look-back measurement method. Under the look-back measurement method, a company may determine the status of an employee as a full-time employee during a future period (called a “stability period”) based upon the hours of service of the employee in a prior period (called a “measurement method”). See Worksheet #3 of the Checklist for more information on these two methods. Employers should document which method they decide to use.
  • Consider who are your common law employees. The penalties apply with respect to full-time common law employees, which makes it very important for employers to properly classifying and count all common law employees. Careful consideration should be given to 1099 independent contractors and employees hired through staffing firms. Failing to properly take all common law employees into account can easily cause an employer to fail the 70% coverage test for 2015 and the 95% coverage test in later years. For more information, please see our June 12, 2013 Legal Alert “Another Reason Not to Misclassify Employees.”  See Worksheet #2 of the Checklist for more information on the staffing firm issue.
  • Adopt appropriate plan amendments. Many plan sponsors will need to amend plans to comply with these rules. For example, plans will need to use a 30 hour or lesser eligibility standard, eliminate exclusions that make the employer fail the substantially all coverage percentage test, cover natural born and adopted children through the end of the month in which they turn age 26, and document whether they are using the monthly or look-back measurement method to track full-time employee status. For employers who use the look-back measurement method, COBRA changes may also be needed. See Worksheet #4 of the Checklist for more information.
• Gear Up For Code Section 6055 and 6056 Reporting:
  • Small and Large Employers with Self-Insured Health Plans Must Report Minimum Essential Coverage (MEC). Starting in 2016, Section 6055 of the Internal Revenue Code (Code), which was added by the Health Care Reform Act, requires all entities providing MEC to submit information to the IRS concerning each covered individual for the 2015 calendar year. Section 6055 also requires these entities to provide statements containing similar information to certain covered individuals. Employers should start gearing up now for this reporting because the 2016 reporting is based on 2015 data. MEC is broadly defined to include any group health plan or group health insurance that is not an excepted benefit (e.g., stand-alone dental or vision plan). Form 1094-B and Form 1095-B will be used to submit this information to the IRS. Unlike Section 6056 discussed below, all employers sponsoring self-insured health plans must report on all covered employees, regardless of the size of the employer or the status of the covered employee (e.g., part-time). Employers sponsoring insured health plans are not required to comply. However, these employers may need to collect and provide employee information to the insurer so the insurer can meet its Section 6055 obligations. Large employers sponsoring self-insured health plans may use combined reporting to comply with both Section 6055 and Section 6056 by completing one form per individual. For more information, please see our October 24, 2014 SW Benefits Update, “Section 6055 Reporting of Health Plan ‘Minimum Essential Coverage’ for Small and Large Employers.”
     
  • Large Employers Must Report on Health Coverage Offered to Full-Time Employees. Starting in 2016, Section 6056 of the Code, which was also added by the Health Care Reform Act, requires applicable large employers to annually report to the IRS information regarding health coverage offered to full-time employees in the 2015 calendar year. Additionally, starting in 2016, applicable large employers must provide individual statements to each full-time employee regarding the type of coverage that was offered to that employee in the 2015 calendar year. All applicable large employers must comply, regardless of whether the employer sponsors a self-insured or fully insured health plan, or if the employer does not offer health coverage to its employees. Similar to Section 6055, employers should begin preparing to meet these requirements now. By January 1, 2015, most employers will need to start gathering and recording monthly health coverage information and employee data to ensure proper completion of these information returns. As a result, employers should create procedures for how this information will be collected and documented. Form 1094-C and Form 1095-C will be used to submit this information to the IRS. Some large employers may qualify for simplified reporting, which could ease data collection requirements, so employers should consider whether to use such rules. For more information, please see our October 28, 2014 SW Benefits Update, “Section 6056 Reporting of Health Coverage Information for Large Employers.”
     
• Amend Code Section 125 Cafeteria and Flexible Benefit Plan By December 31, 2014 for Recent Changes in the Law. As reported in our September 23, 2014 SW Benefits Update, “When Did You Last Amend Your Section 125 Cafeteria or Flexible Benefit Plan? Now May Be A Good Time to Dust It Off and Update It,” many Code Section 125 plans must be amended by December 31, 2014 to reflect various changes in the law. Following is a list of changes employers may need to make:
  • Amend health flexible spending accounts to reflect the $2,500 cap on salary reduction contributions. Health flexible spending accounts (health FSAs) had to comply with the $2,500 cap for plan years beginning on or after January 1, 2013 and must adopt an amendment reflecting the cap no later than December 31, 2014. In IRS Revenue Procedure 2014-61, released on October 30, 2014, the IRS announced the $2,500 limit is increasing to $2,550 in 2015. Employers wanting to take advantage of this increase should make sure they have appropriate cost-of-living language in their health FSA plan and reflect the new dollar limit in their open enrollment materials for 2015.
  • Consider allowing carryover of $500 for health FSAs. Employers that want to permit carryovers must notify employees and amend their health FSA to reflect the carryover. Carryover amendments must usually be adopted on or before the last day of the plan year from which amounts are carried over. However, a special rule applies to plans that permitted carryovers from 2013 to 2014. Such plans must be amended to reflect the carryover by the last day of the 2014 plan year (i.e., December 31, 2014 for calendar year plans).
  • Amend Code Section 125 plans to reflect the federal recognition of same-sex marriages. Employers must now allow same-sex spouses to pay health insurance and other premiums on a pre-tax basis. Same-sex spouses may also be covered under a health FSA and must be treated as spouses under dependent care accounts. Plans should be amended by December 31, 2014 to treat same-sex spouses the same as opposite-sex spouses.
  • Amend Code Section 125 plans to prohibit providing qualified health plans offered through a Health Exchange. Plans had to comply with this requirement as of the first day of the plan year beginning in 2014 and should be amended to reflect this rule.
  • Amend non-calendar-year cafeteria plans to allow mid-year election changes. In 2014, employees were first able to purchase coverage through Health Exchanges and the individual mandate took effect. To accommodate employees participating in non-calendar-year cafeteria plans (who would otherwise have been locked into their elections as of January 1, 2014), the IRS provided transition relief: (1) allowing employees to prospectively revoke or change their salary reduction elections for accident and health plan coverage once during the plan year, without regard to whether there was a change in status event; and (2) allowing employees who failed to make salary reduction elections for accident and health plan coverage prior to the normal IRS deadline for the 2013 plan year to make prospective salary reduction elections for such coverage during the plan year, without regard to whether there had been a change in status event. Employers who permitted either mid-year election change during the 2013 plan year must amend their plans by December 31, 2014 to reflect the transition rules.
  • Amend health FSAs to require participants to have a prescription for over-the-counter medications to be eligible for reimbursement under a health FSA. This is a fairly old change. It took effect January 1, 2011, but it is worth noting.
  • Consider whether to allow two new change events as announced in IRS Notice 2014-55. As employers prepare year-end amendments for the above changes, they should also consider whether to amend their Code Section 125 plans to allow two new change events announced in IRS Notice 2014-55. That Notice now allows employees to make certain mid-year health coverage changes when they reduce below 30 hours of service or enroll in a qualified health plan through a Health Exchange. Employers who want to permit either of these two new changes must amend their Code Section 125 plans by the end of the plan year in which the changes are allowed. However, a special rule applies to plans that permit changes during the 2014 plan year. Such plans must be amended by the last day of the 2015 plan year (i.e., December 31, 2015 for calendar year plans).
• Continue to Track and Comply with Health Care Reform Changes: Employers should continue moving forward with implementation of the Health Care Reform Act. See our checklist that provides a more detailed summary of the principal requirements under the Health Care Reform Act, beginning with those that first became effective in 2010 and continuing through those that will become effective in 2018. The purpose of that checklist is to provide a summary of the principal requirements under the Health Care Reform Act that apply to employer-sponsored group health plans. The Health Care Reform Act and its related guidance go into much more detail and should always be consulted when considering its application to any particular plan.
• If a Group Health Plan is a Grandfathered Plan, Review Grandfathered Status: Group health plans that were in existence on or before March 23, 2010 and that have not undergone significant changes since then (grandfathered plans) have to comply with some, but not all, of the requirements under the Health Care Reform Act. Employers that have made any changes to their health plans or added a wellness component in 2013, or in connection with open enrollment for an upcoming plan year, should consider whether those changes cause the plan to lose grandfathered status. If grandfathered plan status is lost, the plan must comply with additional requirements that apply to non-grandfathered plans as of the date grandfathered status is lost.
• Cover Preventive Services without Cost Sharing in Non-Grandfathered Health Plans: Non-grandfathered group health plans were first required to provide coverage for preventive services without cost sharing for plan years beginning on or after September 23, 2010. Non-grandfathered group health plans were required to cover additional women’s preventive services without cost sharing for plan years beginning on or after August 1, 2012 (i.e., January 1, 2013 for calendar year plans). Plan sponsors and insurers that are subject to the preventive services mandate should periodically review and update their plans to ensure that they are covering all of the preventive services described in the recommendations and guidelines, which change from year to year. Information about the recommendations and guidelines is available at the Healthcare.gov website, which is updated periodically.
• Update CHIP Notice: The DOL recently revised its model notice for the Children’s Health Insurance Program (CHIP). Employers should begin using this model notice immediately. This notice provides additional information concerning the Health Exchanges, stating that, even if an employee is not eligible for premium assistance through Medicaid or CHIP, the employee may be able to buy individual coverage through the Health Exchange.

• Update COBRA Notices: As reported in our July 22, 2014 SW Benefits Update “Rethinking COBRA After Health Care Reform,” in May 2014, the DOL issued a new model general notice and a new model election notice, which are available at http://www.dol.gov/ebsa/cobra.html. The general notice now includes basic information about the Health Exchanges. The model election notice has been substantially revised to include detailed information about Health Exchanges, enrollment opportunities and restrictions, financial assistance, and factors to consider in deciding whether to elect COBRA, Health Exchange coverage, Medicaid or other coverage. There is no specific date the two new model notices take effect, however, employers may wish to consider updating their COBRA notices, sooner rather than later, so individuals understand these new, rather complicated, rules. Providing this information may also encourage qualified beneficiaries to elect Health Exchange coverage rather than COBRA coverage. When updating COBRA notices, we caution employers to use the new model notices as a starting point. For example, the new model election notice omits details about extending COBRA coverage due to disability or a second qualifying event. Many employers will want to retain such information in their election notices.

• Rethink COBRA Under Severance Agreements: Many employers, under severance agreements, offer to subsidize COBRA premiums if the individual elects COBRA coverage. Given the interplay between COBRA coverage and Health Exchange coverage, as explained in our July 22, 2014 SW Benefits Update, “Rethinking COBRA After Health Care Reform,” this approach may no longer be a best practice. If an employer offers to temporarily subsidize COBRA coverage, forcing the employee to elect COBRA coverage to obtain the subsidy, the employee may not be able to elect Health Exchange coverage in lieu of COBRA coverage when the employer subsidy ends. Due to these recent developments, employers might instead provide an equivalent taxable cash payment to the employee, allowing the employee to choose COBRA coverage, Health Exchange coverage, other coverage or no coverage. Providing taxable cash compensation also avoids potential nondiscrimination issues under Code Section 105(h) if the employee is highly compensated. See our July 31, 2014 SW Benefits Blog, “Subsidized Post-Termination COBRA Benefits” for more information about COBRA and severance agreements.

• Update Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Policies and Business Associate Agreements: On January 25, 2013, HHS issued the HIPAA Omnibus Rule, which updated covered entities’ responsibilities. Employers that sponsor their own self-insured health plans are covered entities. Among other things, the final rule clarifies a covered entity’s obligation with respect to a breach of unsecured protected health information, known as the “breach notification rule.” The breach notification rule sets forth the covered entity’s responsibility to identify what caused the breach and immediately remedy those causes. Employers should have updated their HIPAA Privacy and Security Policies and Procedures to comply with the final rule’s September 23, 2013 deadline. In addition, the final rule clarifies that business associates are also responsible for protecting protected health information. Business associates are usually vendors of the covered entity that handle protected health information. If not already included in the business associate agreement, employers should add language providing that any subcontractor that business associate utilizes will enter into a written contract with the business associate and abide by the same rules as the business associate. Covered entities generally should have updated these business associate agreements by September 23, 2013. However, the final rule provided transitional relief to certain entities, allowing those that qualify to have until September 22, 2014 to comply. Regardless, as noted in our September 8, 2014 SW Benefits Update,“HIPAA Business Associate Agreements – Reminder of September 22, 2014 Deadline,” all existing agreements with business associates should have been amended by September 22, 2014 to comply with the requirements of the final rule.

• Apply for Health Plan Identifier (HPID) for Certain Self-Insured Plans: HHS regulations required many health plans to obtain an HPID by November 5, 2014. However, on October 31, 2014, HHS delayed this deadline indefinitely, likely due to the fact that the online application process has not been functioning properly. An HPID is a ten-digit number that is unique to that health plan so it can be easily identified by HIPAA-covered entities (e.g., health insurers, clearinghouses, group health plans and providers electronically transmitting health information) in standard electronic transactions involving the exchange of health care data between these entities. Beginning November 7, 2016, all covered entities must use an HPID whenever a covered entity identifies a health plan that has an HPID in a standard electronic transaction. At this time, it is unclear whether this deadline will also be extended. A “controlling health plan” (CHP) must obtain an HPID. A “subhealth plan” (SHP) may also obtain an HPID, but is not required to do so. A CHP means a health plan that: (1) controls its own business activities, actions, or policies; or (2)(i) is controlled by an entity that is not a health plan; and (ii) if the CHP has SHPs, it exercises sufficient control over the SHPs to direct their business activities, actions or policies. An SHP is a health plan that has its business activities, actions, or policies directed by a CHP. Self-insured group health plans that meet the CHP definition must obtain an HPID, even if the self-insured plan does not conduct or need to be identified in standard electronic transactions. Fully insured plans generally do not need to obtain a separate HPID since the insurer’s CHP HPID can be used. “Small” health plans, defined as plans with five million dollars or less in annual receipts, do not have to obtain an HPID until November 5, 2015. Proper identification of CHPs is crucial as it impacts compliance requirements in the future, as outlined below. For more information, please see our October 1, 2014 SW Benefits Update “HIPAA Requires Many Health Plans to Obtain a Health Plan Identifier by November 5, 2014.”

• Obtain HIPAA Standard Electronic Transaction Certifications. The Health Care Reform Act generally mandated that rules be established to require health plans to obtain certifications demonstrating compliance with HIPAA standard electronic transactions. On January 2, 2014, HHS issued proposed regulations to that effect. The proposed regulations build upon the HPID regulations discussed above, requiring CHPs to submit information and documentation that demonstrates compliance with the standards and operating rules adopted by HHS for the following electronic transactions: (1) eligibility for a health plan; (2) health care claim status; and (3) health care electronic funds transfers and remittance advice. This documentation must confirm that the CHP has completed internal and external testing of its information systems. This requires obtaining specific credentialing from an outside vendor and submitting to HHS an attestation of this credentialing. The HHS submission also requires the number of covered lives be reported on the date of the submission. HHS will compare the list of HPIDs to the list of plans that have submitted an attestation to determine noncompliance. Penalties for noncompliance can be as high as $40 per covered life annually, subject to increase for following years. The certification and submission must be completed by December 31, 2015. Technically, a second certification and submission concerning other standard electronic transactions is due on December 31, 2015. However, this will likely be delayed because the operating rules for these transactions have not been adopted yet. Similar to the HPID rules, small health plans are given an extra year to comply. While the final regulations have not been issued, the certification process will undoubtedly necessitate advance planning, requiring communication and cooperation with outside vendors. Further, CHPs have significant responsibilities under these proposed rules. CHPs are responsible for submitting information and documentation on behalf of its SHPs. CHPs are also responsible for compliance of its business associates.

• Review Wellness Programs: As reported in our July 17, 2013 Health Care Alert, “Final Wellness Rules May Require Review of Existing Wellness Programs,” final wellness regulations were issued that apply to employer-sponsored group health plans for plan years beginning on or after January 1, 2014. Importantly, the final regulations provide that health-contingent welfare plans that do not address tobacco use may offer rewards of up to 30% of the cost of employee-only coverage. If the welfare plan is designed to prevent tobacco use, a reward of up to 50% may be offered. In addition, the final regulations provide that wellness programs must offer a reasonable alternative (or waive the standard) for those participants for whom it is unreasonable for them to meet the standard because of a medical condition (activity based wellness programs), or for those participants who do not meet the initial standard on screening (outcome based wellness programs). The Equal Employment Opportunity Commission (EEOC) has recently filed three challenges to biometric testing by corporate wellness programs. Employers designing wellness programs must not only comply with the final wellness regulations, but also other applicable laws such as the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act, which limit the penalties and rewards that may be offered under wellness programs. Rewards and penalties that are too large may cause such programs to be involuntary, in violation of applicable law. For more information on the final wellness regulations, please see the above referenced Health Care Alert.
• Review Employee Assistance Programs: Final regulations were recently released concerning the criteria necessary for benefits offered through an Employee Assistance Program (EAP) to qualify as excepted benefits. Excepted benefits are generally exempt from the requirements of the Health Care Reform Act. In order to qualify for this relief: (1) the program cannot provide “significant benefits in the nature of medical care;” (2) the benefits cannot be coordinated with benefits under another group health plan; (3) no employee premiums or contributions can be required to participate in the EAP; and (4) there must be no cost-sharing under the EAP. The regulations do not provide detailed elaboration upon the meaning of “significant” medical benefits. The regulations provide examples and generally state that the amount, scope and duration of covered services are taken into account. These final regulations, and the criteria described above, take effect in 2015. Before the final regulations were released, interim guidance was provided in IRS Notice 2013-54, affording transitional relief during 2014. Notice 2013-54 provides that benefits under an EAP qualify as excepted benefits if the program does not provide significant medical benefits, identical to the first criterion found in the final regulations. Notice 2013-54 does not require the other three criteria found in the final regulations. No detail is provided concerning the meaning of significant medical benefits in Notice 2013-54. Employers may use a reasonable, good faith interpretation of this language for 2014. Employers should carefully review their EAPs to confirm they comply with each of these four requirements starting in 2015. 
• Continue to Report and Pay Patient-Centered Outcomes Research Institute (PCORI) Fees: Health insurance issuers and sponsors of self-insured health plans must continue to report and pay PCORI fees. For health insurance issuers and plan sponsors of self-insured plans with calendar-year policy or plan years, the first IRS Form 720 and payment was due July 31, 2013. The PCORI fee for a plan or policy year is equal to the average number of lives covered under the plan or policy, multiplied by an applicable dollar amount. For the first year, the applicable dollar amount was $1. This amount was increased to $2 for the second year. For the third year (i.e., plan years that end on or after October 1, 2014 and before October 1, 2015), the applicable dollar amount is $2.08. Future amounts will be adjusted to reflect inflation in National Health Expenditures, as determined by HHS. More information about PCORI fees can be found in our August 9, 2012 Health Care Reform Legal Alert, “Health Care Reform’s New Research Fees: What Employers Need to Know.”

• Continue to Comply with IRS Form W-2 Reporting of the Cost of Employer-Sponsored Group Health Plan Coverage: Beginning with the Form W-2 issued in January 2013 (i.e., the Form W-2 issued for the 2012 calendar year), employers were required to report to employees the cost of their employer-sponsored group health plan coverage. This reporting is for informational purposes only and is intended to communicate the cost of health care coverage to employees. It does not change how such benefits are taxed. This requirement continues to apply for future years. More information about the reporting requirement can be found in our July 26, 2012 Health Care Reform Legal Alert, “W-2 Reporting of Employer-Sponsored Group Health Coverage.”

• Provide 60-Day Advance Notice of Changes Impacting Summary of Benefits and Coverage (SBC): As reported in our July 19, 2012 Health Care Reform Legal Alert, “Summary of Benefits and Coverage for Group Health Plans,” the Health Care Reform Act requires group health plans to give participants 60-days advance notice before making any material modification in plan benefits or coverage that is not reflected in the most recently provided SBC. This applies to both benefit enhancements and reductions.

• Update Summary Plan Descriptions (SPDs) if Needed: SPDs must be updated once every 5 years if the plan has been amended during the 5-year period and once every 10 years for other plans. SPDs may need to be updated.  

• Distribute Summary Annual Report: Distribute a summary annual report, which is a summary of the information reported on the Form 5500. The summary annual report is generally due nine months after the plan year ends. If the Form 5500 was filed under an extension, the summary annual report must be distributed within two months following the date on which the Form 5500 was due.